DAR File No. 27822

Tax Commission, Auditing

R865-19S-51

Fabrication and Installation Labor in Connection With Retail Sales of Tangible Personal Property Pursuant to Utah Code Ann. Section 59-12-103

NOTICE OF PROPOSED RULE

DAR File No.: 27822
Filed: 04/15/2005, 01:46
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The section is amended as a result of recent legislation that amends the provisions for imposing tax on labor charges.

Summary of the rule or change:

The proposed amendment deletes language that is found in statute subsequent to amendments made by H.B. 51 (2002) and S.B. 127 (2005). (DAR NOTE: H.B. 51 is found at UT L 2002 Ch 117, and was effective 07/01/2002. S.B. 127 is found at UT L 2005 Ch 158, and will be effective 07/01/2005.)

State statutory or constitutional authorization for this rule:

Section 59-12-103

Anticipated cost or savings to:

the state budget:

The current statutory treatment for taxation of labor charges is a result of H.B. 51 (2002) and S.B. 127 (2005).

local governments:

The current statutory treatment for taxation of labor charges is a result of H.B. 51 (2002) and S.B. 127 (2005).

other persons:

The current statutory treatment for taxation of labor charges is a result of H.B. 51 (2002) and S.B. 127 (2005).

Compliance costs for affected persons:

Generally, if the underlying property is exempt from sales tax, charges for repairs to the property are tax exempt.

Comments by the department head on the fiscal impact the rule may have on businesses:

None--The rule language removed is unnecessary because sales tax statutes indicate when repairs are taxable. Pam Hendrickson, Commission Chair

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Sheri McFall at the above address, by phone at 801-297-3901, by FAX at 801-297-3919, or by Internet E-mail at sherimcfall@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/01/2005

This rule may become effective on:

06/02/2005

Authorized by:

Pam Hendrickson, Commissioner

RULE TEXT

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-51. Fabrication [and Installation ]Labor in Connection With Retail Sales of Tangible Personal Property Pursuant to Utah Code Ann. Section 59-12-103.

A. The amount charged for fabrication [or installation which]that is part of the process of creating a finished article of tangible personal property must be included in the amount upon which tax is collected. This type of labor and service charge may not be deducted from the selling price used for taxation purposes even though billed separately to the consumer and regardless of whether the articles are commonly carried in stock or made up on special order.

B. Casting, forging, cutting, drilling, heat treating, surfacing, machining, constructing, and assembling are examples of steps in the process resulting in the creation or production of a finished article.

[C. Charges for labor to install personal property in connection with other personal property are taxable (see Rule R865-19S-78) whether material is furnished by seller or not.

D. Labor to install tangible personal property to real property is exempt, whether the personal property becomes part of the realty or not. See Rule R865-19S-58, dealing with improvements to or construction of real property, to determine the applicable tax on personal property which becomes a part of real property.

E.]C. [Tangible]Sale of tangible personal property [which]that is attached to real property, but remains personal property, is subject to sales tax on the retail selling price of the personal property, [and installation charges are exempt if separately stated. If the retailer does not segregate the selling price and installation charges, the sales tax applies to the entire sales price, including installation charges]unless the tangible personal property attached to the real property is exempt from sales and use tax under Section 59-12-104.

[F.]D. This rule primarily covers manufacturing and assembling labor. Other rules deal with other types of labor and should be referred to whenever necessary.

KEY: charities, tax exemptions, religious activities, sales tax

[December 21, 2004]2005

Notice of Continuation April 5, 2002

59-12-103

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Sheri McFall at the above address, by phone at 801-297-3901, by FAX at 801-297-3919, or by Internet E-mail at sherimcfall@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.